Support Departments Producing Departments Personnel Maintenance Fabrication Asse
ID: 2347739 • Letter: S
Question
Support
Departments
Producing
Departments
Personnel
Maintenance
Fabrication
Assembly
Budgeted overhead
$160,000
$288,000
$560,000
$640,000
Direct labor hours
8,000
10,000
32,000
40,000
Machine hours
12,000
15,000
48,000
32,000
Number of employees
16
20
60
100
Personnel costs are allocated based on the number of employees, and maintenance costs are allocated based on machine hours.
Predetermined overhead rates for fabrication and assembly are based on direct labor hours. (Round to the nearest dollar.)
The amount of maintenance costs allocated to the Assembly Department using the direct method would be
a.
$115,200
b.
$192,000
c.
$57,600
d.
$152,640
Support
Departments
Producing
Departments
Personnel
Maintenance
Fabrication
Assembly
Budgeted overhead
$160,000
$288,000
$560,000
$640,000
Direct labor hours
8,000
10,000
32,000
40,000
Machine hours
12,000
15,000
48,000
32,000
Number of employees
16
20
60
100
Explanation / Answer
Maintenance costs are allocated to Fabrication and Assembly. They are allocated on the basis of machine hours. Budgeted maintenance costs are 288,000. Total machine hours are 48,000 + 32,000 = 80,000. The rate is $288,000/80,000 machine hours = $3.60 per machine hour. Since Assembly has 32,000 machine hours, the amount allocated would be 32,000 * 3.6 = 115,200
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